CEO of GrowthHackers.com. Previous roles include first marketer at Dropbox, Lookout, Xobni, LogMeIn (IPO), and Uproar (IPO). Also interim marketing exec roles at Eventbrite, Socialcast, and Webs.
One of the requirements when we acquired KISSinsights was that we change the name. As much as we loved the KISSinsights’ name, a new name would gives us the flexibility to extend beyond collecting insights.
Having been through naming exercises several times, I realized it would be an opinionated, emotional process. All startups want a name that will help success, or at the very least won’t stand in the way it. And unlike most startup decisions that are temporary and iterative, naming is a lot harder to reverse.
So we began our renaming exercise with some trepidation. Like most companies, we were tempted to go with a cookie cutter name. Finalists included SnapTabs and BuzzBits.
Our VP of Product, Jason Meresman, suggested Qualaroo. My initial reaction was “We can’t have a name like that!” It went against my conservative nature to blend in… Then I realized that blending in is the last thing a product should want to do.
Jason laid out a compelling case for Qualaroo.
It’s unique
It’s fun to say
Qual can mean qualified, quality, qualitative
Roo can connect to a memorable kangaroo image
Of course, like all important decisions we wanted to get input from some customers and peers. We shared several potential names and asked for feedback and/or suggestions. Most people had the same reaction that I initially had. They gravitated to names that sounded “ordinary.” A few people sent persuasive support for Qualaroo, but they were in the minority.
So we were left with the decision to go with a safe, cookie cutter name or something more distinctive. Not surprisingly, we chose Qualaroo. It seems to strike the right balance of whimsical and serious. And most importantly, tests show that people really remember it.
We also decided to make the free version much better (custom questions, 3X more responses per survey, full targeting functionality), so expect to see the Qualaroo kangaroo hopping up on a lot more websites…
If you are going through a naming exercise, I recommend that you fight the urge to blend in. Here are a few resources on naming that were useful for us:
Yesterday TechCrunch covered our acquisition of KISSinsights. This acquisition may seem a little out of left field, but we’ve actually been moving in this direction for a while. I figured other entrepreneurs would benefit from understanding the path that we’ve been following.
The path started with CatchFree.com. The idea for CatchFree was to capitalize on the fact that the freemium business model was creating many very strong businesses, but the economics of these apps constrained their ability to pay to accelerate adoption. Our leap of faith was that by organizing freemium apps around detailed user ratings, we’d be able to create a very popular resource for consumers and small businesses.
Since launching at TechCrunch Disrupt last year the site has attracted over 1.8 million users and collected detailed ratings for over 1000 apps. But surprisingly, app publishers were more interested in the structured insights we uncovered than the traffic we were sending.
If you read my previous post, I mentioned a service we were developing called MustHaveScore. It was an attempt to productize our process for collecting detailed ratings for the products listed on CatchFree and package the insights in a way that they’d be even more useful for app publishers. The response was very strong. Tomer Dvir, CEO at Soluto, recently told me that insights have enlightened everything from their messaging to their product road map. And others were enthusiastic too. In fact, we soon realized that our “concierge MVP” approach was going to overwhelm us. By concierge MVP, I mean that we were manually categorizing write-in answers to how people used an app. Now that we’ve validated demand for this product we are working on a more automated way to provide it. We’ll also come up with a price point that makes it a viable offering. In the meantime, we’ve moved MustHaveScore into a private Beta.
Through the execution of MustHaveScore we found that many people were looking for a more elegant way to collect feedback from their users. They also wanted the flexibility to ask their own questions. It became clear that what they really wanted was KISSinsights, so we approached our friends at KISSmetrics about buying it. Fortunately for us KISSmetrics wanted to put all of their focus on their hot analytics business and we were able to reach an agreement to acquire KISSinsights.
What is KISSinsights?
If you’re not familiar with KISSinsights, it’s absolutely awesome. It essentially pioneered the microsurveying category, making it possible to ask website users questions as they are making decisions, the crucial point at which they are likely to remember their motivation for making the decisions. This is a really powerful way to learn how to improve conversions and engagement. Of course it can be used for more general surveying, but this flexibility to intelligently target users on a website is what really makes it special.
And as an advisor to KISSmetrics, I’ve been helping with the product since it’s inception so I really understand it. It evolved out of the Survey.io project that KISSmetrics and I launched in 2009.
Heat Seeking Missile
Our business will continue to evolve for the foreseeable future. Josh Kopelman referred to this process when he wrote about entrepreneurs that are “heat seeking missiles.” I highly recommend his blog post on the subject if you haven’t read it. One of the areas we’ve been exploring is helping companies take action on “actionable insights.” Our longer term vision has also evolved, but I’ll save that for another blog post.
If you’re a KISSinsights customer or have ever used it, I would love the opportunity to talk with you about it. Please send me an email to ellisatcatchfreedotcom so we can schedule a quick 15 minute call.
After helping to bring several startups to market including Dropbox, LogMeIn and Lookout, I found that the key to sustaining rapid growth is understanding your “must have” experience and then aligning the entire business around that experience. This includes aligning the product roadmap, funnel optimization, and messaging.
Process for Uncovering Your Must Have Experience
With each new startup, I immediately started working to uncover the “must have” experience before I formed preconceptions about how and why a product would be useful. This involved a rigorous process for identifying the most passionate users and then getting their unstructured feedback about how they were getting value. With each new cohort of users that I engaged, I began to get more structured feedback to converge on a signal of the “must have” experience. Once I had a clear signal, I could work with the team to start aligning the business around the “must have” experience.
I also found that it was important to monitor this “must have” experience over time. Each new product update can change it. Shifts in the competitive landscape can also affect it. For an experience to be a “must have” it should be both valuable and unique. The emergence of a new competitor can instantly turn your “must have” experience into a “nice-to-have” experience.
MustHaveScore Makes it Much Easier
Working with the team of engineers at CatchFree, we’ve been able to not only productize the approach but also improve it. The result is MustHaveScore.com. Our feedback widget requires no customization and intelligently evolves as more users provide feedback. The user input is simple and requires less than a minute of their time. While the backend data processing is complex, the output is simple and easy to understand. We provide a comparative overview of all use cases that shows the relative popularity and passion around each use case, and then we segment user feedback to give you the context to understand why the use case is a “must have.”
Given my background with freemium, it’s not surprising that we decided to offer the most valuable analysis for free (everything described in the previous paragraph). Over time we plan to offer additional premium services to help with positioning, targeting and eventually customer acquisition.
This is not a pivot. MustHaveScore is part of our broader goal of helping people get more value out of innovative technology solutions. After we help you identify your must have use cases, we want to eventually work with you (optionally) to help expose these use cases to prospective customers.
Not a Replacement for Customer Development
This toolset is really for transitioning to growth and then maintaining a strong growth rate after you have achieved product/market fit. It is not a replacement for early stage customer development, which is all about “getting out of the building” to reach product/market fit. In the early days, it is essential to meet face-to-face with existing and prospective customers. There a couple key reasons why early stage startups must meet face-to-face with existing and prospective customers:
They help you form insights that you could never get through structured, automated feedback.
A startup generally doesn’t have enough users to automate the customer feedback function via surveys.
And even when you do have enough users to automate it, face-to-face interviews should always complement surveys. My best epiphanies that led to big boosts in growth have always followed concentrated face-to-face engagements with customers.
Benefits for Early Users
We’ve been slowly rolling out MustHaveScore over the last couple months and now have about 50 companies on the service. This slow rollout has been mutually beneficial since early companies have gotten hands on help interpreting and acting on the data, and we’ve gotten direct feedback to help us improve the service.
Note:MustHaveScore.com is now in private beta while we focus on our recent acquisition of KISSinsights.
The best startups generally begin by trying to address a really important problem worth solving. If they can nail the solution to this important problem, they have a great chance of building a successful startup.
How Solving Problems Can Lead to Failure
Surprisingly, founders’ instincts to solve problems can also cause us to fail. Many startups miss success signals because they are too busy solving problems. Our instincts tell us to be responsive to customer feedback – especially negative feedback. These problems are so actionable that we feel good solving them. But over time a startup that chases problem after problem creates a bloated, fragmented solution that isn’t really needed by anyone.
Find the “Must Have” Use Cases – Ignore Most Problems
Ultimately the goal of any startup should be to create a “must have” product experience. The signal that tells you that you have created a “must have” product is your true north to build a successful business. You should understand everything you can about the “must have” experience so you can cultivate and protect it. Who considers it a must have, how are they using it, why do they love it, why did they need it, where do they come from…?
It feels totally counterintuitive to pursue these positive signals while ignoring most of the feedback about problems. But in my experience, this is the right thing to do. In fact, this is the most important thing that I learned in the years that I focused on helping to take startups to market such as Dropbox, Lookout and Xobni. To reiterate, the positive signal is much more important than the ongoing flow of new problems.
Problems Worth Solving
So which problems are worth solving? Essentially any problem that stands in the way of delivering the “must have” experience once it has been identified.
Problems worth solving include:
Usability issues that prevent reaching the must have experience
Confusing value proposition about the must have experience
Targeting the wrong users (AKA users who don’t need the must have experience)
But start by focusing the majority of your energy trying to create at least one must have use case. If you can’t find any positive signal about someone considering it a must have, then go back and revisit the original problem you were trying to solve. You might need to find one that is even more important to solve.
I recognize that my recommendation to ignore most problems is controversial. Please comment whether you agree or disagree. Hopefully we can get some good debate in the comments.
Update: Just to clarify, I’m referring to the data that deserves your focus. I don’t mean to imply that you should be unresponsive to the customers that make suggestions. It is very important to give great customer support. Just don’t promise to change your product/business based on every reported problem.
There is a way to think about that. The model that I have in mind is a graph where the X-axis is the price and the Y-axis is the revenue. At a price point of zero, you make zero money. A ridiculous price or a very high price point, again you make zero money because no one buys your product. This curve starts from zero and then goes up and then comes down. There is a peak, the revenue maximizing price point. Theoretically it is there whether you know it or not. It depends on your product and your demographics, etc., but if everything else is fixed, there is a revenue-maximizing price point. If you actually know the revenue-maximizing price point, you can do say, okay, that’s the top of the peak. However, I prefer to make 10 percent less money but have 20 percent more customers. You want to stay a little bit to the left side of the peak. It is around 90 percent of the revenue maximization point. The way I think about it is a little bit different. I don’t look at it as a continuous thing. I would try to pinpoint the revenue-maximizing price point and then find the nearest round number right before. If my revenue maximizing price point is somewhere between $20 and $30, I would shoot for $19.95. I can tell you that there is at least 20 to 30 percent additional profit you can get by optimizing your product packaging and your product pricing. If you can figure it out, you can go from a company
Shah,Tarang; Shah,Sheetal (2011-11-16). Venture Capitalists at Work: How VCs Identify and Build Billion-Dollar Successes (p. 64). Apress. Kindle Edition.
A lot of people have asked me about how to determine optimal pricing for a product or service. This morning I read the following statement from Alex Mehr, the founder/CEO of Zoosk, and thought it was the best explanation I’d ever seen. It’s a great articulation of the theory behind the process I’ve used for years.
Alex Mehr, the founder/CEO of Zoosk on pricing: “There is a way to think about that. The model that I have in mind is a graph where the X-axis is the price and the Y-axis is the revenue. At a price point of zero, you make zero money. A ridiculous price or a very high price point, again you make zero money because no one buys your product. This curve starts from zero and then goes up and then comes down. There is a peak, the revenue maximizing price point. Theoretically it is there whether you know it or not. It depends on your product and your demographics, etc., but if everything else is fixed, there is a revenue-maximizing price point. If you actually know the revenue-maximizing price point, you can do say, okay, that’s the top of the peak.
However, I prefer to make 10 percent less money but have 20 percent more customers. You want to stay a little bit to the left side of the peak. It is around 90 percent of the revenue maximization point. The way I think about it is a little bit different. I don’t look at it as a continuous thing.
I would try to pinpoint the revenue-maximizing price point and then find the nearest round number right before. If my revenue maximizing price point is somewhere between $20 and $30, I would shoot for $19.95. I can tell you that there is at least 20 to 30 percent additional profit you can get by optimizing your product packaging and your product pricing. If you can figure it out, you can go from a company.”
Many of the most successful founders, CEOs and VCs in Silicon Valley belong to the cult of great product. They understand that a great product is critical to the success of a startup. News around the life of Steve Jobs has galvanized even more people to jump on the “great product” bandwagon. Generally this is a good thing, but there tends to be a lot of confusion about what makes a great product.
Great products aren’t anointed by product gurus. Only customers can decide if a product is great.
Customers will decide your product is great if you can map it to their motivation for changing to your solution. All customers change from something. Generally they either switch from a competitive solution or from just tolerating a problem without a solution. New products should decide on one of these markets. Trying to serve both markets generally leads to failure.
One way to decide which market to serve is to ask yourself: “when we are generating $100m in revenue, which type of customer do we think will contribute the majority of this revenue?” Your guess is usually the market you should serve.
Greenfield Customers
If you decide to target “greenfield” people (those without a current solution), then your product roadmap should be focused on simple, effective execution of their desired task. Simplicity is usually much more important for greenfield users than being feature rich. Dropbox is a great example of a product that has succeeded in a greenfield market with a dead simple solution. For some categories, features do eventually become important to users, but on a greenfield user’s first experience they should not be emphasized.
Competitive Solution Customers
If you are targeting people who will be switching from another solution, then usually features are an important part of people’s decision to try it. In this case, you’ll want to make sure that you at least have parity on the key features. Of course they have no reason to switch if everything you do is the same, so you’ll need to understand their switching motivation. If you can differentiate on one of the key gripes of the competitive solution, there is a good chance you can be successful. Common gripes include price, reliability, poor customer service, lack of key features, etc. You’ll need to both message this differentiation and also deliver on the promise. A “false promise” will cause a high churn rate (people who stop using your product).
Reduce Conversion Hurdles
Either way, switching takes a lot of guts and effort. Most people are afraid and/or complacent about switching. Even for those who take the initiative to consider your solution, most will give up before actually trying it. So it’s also critical to reduce all hurdles that may cause them to abandon the conversion process.
You’ll know you have created a great product when users tell you they can’t live without it. Unfortunately the “cult of great product” occasionally forgets about these critical components of building an indispensible product.
The startup I founded last fall, CatchFree, officially launched at TechCrunch Disrupt on Tuesday of this week. Only a TechCrunch event could offer this: within 24 hour we were contacted by Corp Dev at two of the biggest Internet companies in the world. Of course it’s way too early to have any substantive conversations, but it’s a great early opportunity to build a relationship that could be meaningful down the line.
More importantly, TC Disrupt was very helpful in kick starting our UGC. Users submitted and reviewed hundreds of free apps and services on the first day. We had identified a critical mass of authentic, non-anonymous reviews as one of the biggest hurdles in the business. TechCrunch helped us clear this hurdle in a single day. It didn’t hurt that Dropbox, SpringPad, SurveyMonkey, LogMeIn, WordPress.com, Xobni, KissInsights, Lookout, Webs, Mavenlink, and many others also recruited their passionate users to support them on CatchFree via Twitter.
The Key Challenge with Freemium
The vision for CatchFree is based on the frustration I faced trying to help grow 15 freemium startups. Customer acquisition is probably the number one challenge for a freemium company. You’d think it would be easy giving away free products. It’s not. To understand why, just try standing on a corner in any big city handing out free apples; you’ll find that people are pretty skeptical. That same skepticism applies when trying to give away free software, services and apps. Too many people have been burned in the past.
Compounding the issue is that freemium businesses can typically only afford to spend about 5-10% of their “premium only” counterparts acquiring a new user. This makes it very hard for a freemium company to buy growth in traditional channels, where inventory generally goes to the highest bidder. If the product is good enough, eventually organic growth kicks in, but many freemium companies give up or run out of money before they are able to achieve sufficient growth. Even when organic growth is reasonably strong, the inability to accelerate it can be frustrating for even the most successful companies.
Hub of the Freemium Ecosystem
CatchFree is solving this challenge by helping freemium businesses leverage their most important asset to grow – large passionate user bases. The CatchFree Network links together the best freemium apps and services, enabling each service to draw off the growth experienced by other leading freemium services. We will be offering referral credits for each person referred from a freemium business to the network and providing surplus referrals back to a freemium company at a profitable CPA. Collectively the best freemium businesses have nearly a billion users between them, so they will all benefit when traffic can circulate easily among them.
To be effective, CatchFree must adopt the culture and standards of the best freemium companies. So we have put it entirely within our community’s control to determine who can and can’t be accepted to the network. Unethical behavior by freemium businesses will quickly get them banned by the network. While this may seem anti-commercial, it turns out that a highly ethical approach is a key requirement for a freemium company to succeed anyway. Companies like Dropbox and Evernote are genuinely loved by their users and it’s their evangelism that propels them forward. I know some of you are thinking of some unethical companies that are succeeding with freemium, but I would argue that they were likely ethical in the early days and more recently lost their way because of greed. In those cases, freemium has become a tangential part of their model and is no longer their core.
The Wild Feedback Loop
There will be lots of learning and surprises along the way, but we are very excited to be out in the “wild”. As Paul Graham suggests: “tame” users can only take you so far. By working hard and acting on user feedback, we’re confident we’ll be able to give freemium the platform it needs to thrive and change the game in some of the most profitable categories of technology. As CatchFree gains traction it is going to be very hard to compete against a great freemium app or service.
We also announced our $5.5m Series A funding by Polaris Ventures, True Ventures, Index Ventures, First Round Capital and 500Startups.
Lessons Learned
I’ll try to share lessons learned for taking a network effect startup to market over the coming months. It is significantly more difficult to get traction in a network effect business, but post traction they are much easier to grow. This is part of the reason we raised so much up front.
Here’s our launch demo and a bit more on the vision:
Most founders following a lean startup approach understand the importance of documenting and validating assumptions. My team and I have been doing it since day one.
But recently I began to realize that validating assumptions can also be a waste of time. In a startup your most precious resource is time and focus. If you waste too much time on things that don’t directly impact your ability to succeed, you will almost certainly fail. And if you do succeed, it will be based mostly on luck.
Prioritization is Everything in a Startup
The best way to avoid wasting time is by prioritizing how it is used. Since so much of the focus in an early stage startup should be spent validating assumptions, an essential task is to prioritize the assumptions that need to be validated. While more information about your market is always helpful, certain market assumptions probably aren’t that critical to your success. As with any data, “actionable” is a key word here. If validating or disproving an assumption is not going to change your actions, then it may be interesting, but isn’t actionable.
Crystallize Your Vision of The Successful Business
So how do you determine critical, actionable assumptions in your business? You should start by crystallizing your vision. This is an important part of success anyway. In fact a classic book that studied many of the most successful entrepreneurs in history highlights this exercise as the single most important thing they did.
Visualize every detail of your business when it’s successful. You should be able to answer questions like:
How will customers discover us?
What will be their first experience?
When will they realize they’ve found something great (what specifically will they be doing)?
Why will they think it’s great/important?
Why will they think it’s better than the old way?
How will they describe us to other people?
How will their experience evolve with our business?
When and how will we generate revenue?
How will we reinvest that money to accelerate the business?
Why will the whole model be repeatable and scalable?
Document every detail you can possibly imagine that describes your successful business. The more you visualize it, the more you will really begin to believe it. This will help you generate the authentic passion needed to raise money, attract talent and partners… It will help you connect to the emotions that are so critical to getting people to take a leap of faith on your vision.
Time for a Reality Check
Now stop drinking your own cool aid! Document everything that will need to go right for this vision to be a reality. What are the core assumptions that if proven wrong will make it completely non-viable? These are the assumptions that will be critical to validate. These are the things that will cause you to need to course correct. The earlier you can see the realities that affect your assumptions, the sooner you can get on the right track.
Of course broader market assumptions will also be important over time. They can help you develop a strategy to pursue bigger market opportunities. However, startups are too resource constrained to spend time on these assumption until fully vetting the base assumptions that support your original business premise.
Expect some debate about the order in which assumptions need to be validated. It won’t always be clear which assumptions are critical to success and which are just nice to know. But some level of prioritization will ensure that you maximize time spent validating the most important assumptions.
Below is an answer I recently put on Quora… Since I haven’t posted on my blog for so long, I figured some people not on Quora might find it useful.
Your marketing spend should be very minimal until you validate that you have created a product that people want or need (an important exception is for network effect products, which I’ll cover later). I would suggest 95/5 ratio between product and marketing. You don’t necessarily need a marketing person on the team to do this early validation.
Once you’ve validated that people want or need the product, you should spend as much as you possibly can on customer acquisition as long as the value of each user exceeds the cost of acquiring them. Often this requires raising additional funding, but if you can present proof of profitable, scalable marketing channels then it should be easy to raise the additional funding. Of course you should complement this paid customer acquisition with free sources if possible (and you can start these early in the validation process). If your product really does a good job solving an important need, you should also have strong organic growth. At this point the spend ratio generally tips toward marketing. I’ve seen it as high as 80% to marketing and 20% to product.
The exception for network effect businesses mentioned earlier is for the following reason… The user experience for a network effect product improves with each additional user. You may need to reach a critical mass of users before you can validate that the product is important for users.
In the age of the lean startup, we often forget about the importance of vision. A big audacious vision is critical for attracting venture capital and for getting the early team to “take the leap.” It also stimulates the emotion/passion needed to fuel your team’s persistence to blast through inevitable hurdles.
Vision Needs Traction
Achieving your vision requires first getting traction. The most realistic way to get traction is to break down your vision to something very relevant now for the sweet spot of your target market. This MVP (minimum viable product) is a bridge between concrete customer needs today and your big audacious vision.
Customer development teaches us that elements of the MVP are often based on flawed assumptions. As we validate and refine our assumptions, we need to make sure that the MVP is tracking to these new facts.
Vision Synching/Expanding
It’s also important to revisit your vision when new customer facts emerge. This often provides inspiration for extending the original vision but you should not be exclusively tied to your original vision. Always seek more interesting directions to be able to take the business once traction is established.
At FREEjit we’ve mapped out a primary vision but we continue to explore other huge opportunities we could pursue once we have some traction to leverage. Each new fact adds credence to some potential pivots and reduces the viability of others. Eventually we’ll need to focus on one vision, but the right vision will crystallize over time. Even while we explore these opportunities, our current execution is very focused on the MVP needed to get traction. And the MVP maps well to each of the big opportunities we’re considering.
While vision synching seems like a distraction from gaining traction, I find that it reinvigorates the team and makes the pursuit of traction even more exciting.
Andrew Chen
Brant Cooper
Dave McClure
Eric Ries
Jamie Siminoff
Steve Blank